from the incredible-sense-of-entitlement dept

Having followed the copyright industry for so long, I'm often shocked at the incredible sense of entitlement of those who argue strictly for greater and greater copyright powers. One thing we've discussed in the past is that the gatekeepers (and it always is the gatekeepers) have an issue of constantly overvaluing the content and undervaluing the service. That is, any time they see a new service come along that the public really likes, they insist that all or nearly all of the value must be attributable to the content and not the service. Thus, they will always argue that "the service" is somehow ripping them off. We've seen it over and over again, from ringtone royalties to Guitar Hero to Pandora and others. Every time the story is the same: these other companies are making some money (even if they already pay us) and therefore we're getting screwed. If anyone else is making any money, then the copyright holders start screaming about how it's completely and totally unfair.

In their minds, the value of the service is meaningless. The fact that they were unable to provide such services directly themselves gets totally ignored. They just insist that 100% of the value is the content, and thus they need to get more money. Nevermind the fact that companies like Pandora already pay nearly all of their revenue to the copyright holders. There's always more blood to be squeezed from that stone, even if it means killing the golden goose (to mix a few parables).

Two recent stories illustrate this extreme entitlement, and total dismissal of the value of anyone else, perfectly. Let's start with the Aereo case, which was heard today at the Supreme Court. It will be some time before the court rules, but check out this quote from Gordon Smith, the president of the National Association of Broadcasters on why he believes Aereo is breaking the law:

“Quite simply, Aereo takes copyrighted material, profits from it and does so without compensating copyright holders,” said Gordon Smith, the president of the National Association of Broadcasters.

Of course, that's misleading in the extreme for a variety of reasons. First of all, there are lots of areas where it's perfectly legal to profit from copyrighted materials without compensating copyright holders. Used book stores and used record stores (back when such things existed) are a perfect example. Fair use is another. The point is: just because someone is making a profit does not mean that the copyright holders have to get paid. That's never been the case. In fact, it's the same fallacy described above. People are flocking to Aereo because it provides a better service than the cable companies. But the broadcasters ignore all of that and insist all of the value must come from the content itself.

That brings us to the second story highlighting this, which involves comments over in the EU concerning the legality of reselling digital media. Not surprisingly, the record labels, represented by the IFPI and BPI, are 100% against this sort of thing for no logical reason, other than that consumers might actually prefer such a system. They specifically highlight that the quality and convenience of digital resales are too good, and that might upset the business model the record labels have chosen. The argument echoes the labels' argument against ReDigi in the US, a service that allows people to resell digital content that has been shut down in the US.

Again, the focus here has nothing to do with what's right or what's best for the public. In fact, the entire argument appears to be "fuck the public, we need more money." It completely ignores multiple studies that have shown that a thriving used goods market increases the value of the original market. It ignores the idea that making things easier and better for consumers is a good thing. Instead, it's all about overvaluing the content and undervaluing everything else.

This all goes back to a point we made years ago: industries that have embraced copyright for the entirety of their business model have set copyright up as a crutch on which they lean. Rather than exercising the rest of their body, finding all sorts of other good business models that allow them to improve the experience for customers, they just keep leaning on that crutch and insist it's entirely necessary for them to live. And thus, those other muscles atrophy and wither away. So now that the world is changing and innovating, and others are demonstrating lots of great ways to better serve the public, the copyright maximalists are insisting it's all impossible. They need that damn crutch, and anything else is "piracy." They only have themselves to blame, of course. For decades, people have been explaining to them and showing them how to build better services, how to offer better experiences for everyone, while still making money. And, all they do is lean more on that old crutch and insist it's the only possible way to walk.

It's a massive sense of entitlement, in which they appear to have no self-awareness that they're actively advocating for a world in which the public is worse off.

from the or:-how-to-build-an-intellectual-cage dept

Here are two words that have no business hanging out together: "used MP3s." If you know anything about how computers work, that concept is intellectually offensive. Same goes for "ebook lending", "digital rental" and a host of other terms that have emerged from the content industries' desperate scramble to do the impossible: adapt without changing.

These concepts are all completely imaginary, and yet we treat them as if they are real, and have serious discussions about every last detail of how they function — like a debate about the best mutant superpower, but with multimillion dollar lawsuits. Copyright necessitates that we all pretend we don't know any better. It makes us act stupid.

Take "used MP3s" for example. The idea is instantly nonsensical, and proposing it seems on par with asking how all those people fit inside the television. A "used MP3" is indistinguishable from a "new" one, and on the internet there's no such thing as an individual, discrete copy of an MP3 that gets "moved" from one person to another anyway. Speaking even more broadly, a "file" is not a "thing" at all — it's a concept that we use to help organize and visualize the even more abstract concept of "information" in many different places and states, whether magnetically inscribed on a hard disk platter or being transmitted via radio waves (not to mention the internal operation of a computer, where pieces of the information are shunted around between multiple different components and caches).

A "file" is an analogy, and like all analogies, it's incomplete. It breaks down when taken too far, and then it must be discarded, because analogies only exist for our convenience. "Moving" a file is also an analogy — in reality, we are copying it and then deleting the original. Even deleting a file is usually an analogy — the data is still recoverable, the computer has just been instructed to pretend it's not there anymore.

The purpose of these analogies is not to impose limitations on reality. We don't give up the ability to copy a file because we simulated the ability to move it. We don't have to pretend information degrades like physical objects just because we chose to conceptualize it that way. If we want to describe something as "the size of 10 football fields", we don't demand there be gridiron lines painted on it. There's a reason that stubbornly sticking with analogies is referred to as torture, and every discussion about "used files" or the difference between moving and copying is another turn of the screw.

Because of copyright, we are constantly asked to pretend that these analogies are binding. When we "lend" a Kindle ebook, we must pretend that we gave a thing away and don't have it for a while, when in fact our device is just refusing to let us access it. When a library wants to lend out ebooks, they must pretend they have a "limited number of copies available." When we buy software with an activation code, we must pretend that we "only bought one" and thus can only have it in one place at a time. When we rent a digital movie, we must pretend that we "have to give it back". We have to pretend we're stupid and that our devices have limitations which don't actually exist.

But here's the real kicker: the moment there might be any benefit to the consumer, the content companies toss the analogy out the window, and suddenly want to talk about reality. Thus you get things like ReDigi, the would-be used MP3 market that recently lost in court. ReDigi attempted to make MP3s simulate discrete items by enforcing the analogy of "moving a file" using a monitoring system, such that when you sold an MP3 to someone, it would make sure you deleted your own copy. Though we always suspected it was doomed, it was at least rather fascinating from a legal and policy perspective, potentially creating a clash between copyright and first sale rights. After all, if we are expected to treat digital files like physical property, we should at least be getting the rights that come with that.

But this time the record labels wanted to focus on the fact that there's no such thing as moving a file, and pointed out that ReDigi involved making copies whether or not it also involved deleting other copies — and the judge agreed. This is actually correct, technically and realistically — just don't tell them that next time, when it doesn't benefit them and they're back to calling infringement theft. As if to underline their masterful doublethink when it comes to the nature of property, the labels are all about having their cake and eating it too.

ReDigi is hardly the only example. We've written before about the insane situation with TV and movie streaming, where companies do things like set up a warehouse full of separate DVD players that stream from individual discs, or install a separate TV antenna on the same rooftop for every customer who wants an online stream. They are forced to willfully ignore technological capabilities, engineering principles and simple common sense just to conform to all these broken analogies — and they still face massive opposition from content owners and broadcasters every step of the way.

The real issue, when you get down to it, is that copyright itself is imaginary. A "song" or a "novel" is just as analogical as a "file". Originally, copyright law was very concerned with separating the expression of an idea from the idea itself, and in theory that's still the case, but in practice the line has proven almost impossible to draw. So first we conceptualize an abstract thing like "content" as discrete pieces, then we conceptualize all the abstract rights associated with those pieces, and then we conceptualize the discrete units of distribution and ownership within those rights.

These are all imaginary concepts, built on top of other imaginary concepts, built on top of still more imaginary concepts. It's turtles all the way down.

This does not necessarily mean that there's no place for copyright in the world. But in order for it to function, we have to remember that it's an analogy — it's something chosen and used to achieve a purpose, not something that binds and shapes reality, or that we must conform to at the expense of our better judgement. Originally, copyright was just that: a choice by society to employ the analogies of ownership and property in limited, specially-tailored ways in order to achieve a desired result — a flourishing intellectual and artistic economy. Today, copyright is worlds away from what it was then, and it does more to hinder that goal than help it... but many people seem to have forgotten that it's a just a tool, and we can always put it down.

In all the discussion about the various reasons people give for violating copyright, I think there's one that goes unmentioned: a lot of people just refuse to pretend to be stupid.

from the a-big-first-sale-loss dept

This is hardly a surprise at all. In fact, we expected this kind of ruling all along. ReDigi, the company that was trying to build a "market" around "used MP3s" has lost at the district court. As you may recall, ReDigi tried to set up a system that monitors your own files, so that if you "sell" a used MP3, you have to make sure it's been removed from your own system. As you might imagine, that system is not foolproof, but some effort has been made (and it's only allowed for reselling MP3s ReDigi can prove you've purchased, such as via iTunes, and not for files just ripped from CDs). While I fully expected ReDigi to lose, the ruling is still fairly distressing in just how badly it distorts other parts of the law, which may harm other, even more reasonable uses. Hopefully, ReDigi will appeal and fight back against the more extreme interpretation from the district court here.

First, the court looks into the question of whether or not a transfer of a copyrighted file, where only one file remains at the end, still violates the "reproduction" right. That is, if Bob transfers a file to Alice, and Bob's copy of the file is immediately deleted, is that still a reproduction under the Copyright Act? The court says yes:

...courts have not previously addressed whether the unauthorized transfer of a digital music file over the Internet – where only one file exists before and after the transfer – constitutes reproduction within the meaning of the Copyright Act. The Court holds that it does.

The Copyright Act provides that a copyright owner has the exclusive right “to reproduce the copyrighted work in . . . phonorecords.” Copyrighted works are defined to include, inter alia, “sound recordings,” which are “works that result from the fixation of a series of musical, spoken, or other sounds.” Such works are distinguished from their material embodiments. These include phonorecords, which are the “material objects in which sounds . . . are fixed by any method now known or later developed, and from which the sounds can be perceived, reproduced, or otherwise communicated, either directly or with the aid of a machine or device.” Thus, the plain text of the Copyright Act makes clear that reproduction occurs when a copyrighted work is fixed in a new material object.

Of course, that same bit of the Copyright Act also makes clear that "copying" does not apply to purely digital files, but the court tap dances around that argument. Basically, it says whether or not there are more in the world is meaningless. All that matters is if a copy was made, even if the original was destroyed.

Simply put, it is the creation of a new material object and not an additional material object that defines the reproduction right. The dictionary defines “reproduction” to mean, inter alia, “to produce again” or “to cause to exist again or anew.” See Merriam-Webster Collegiate Edition 994 (10th ed. 1998) (emphasis added). Significantly, it is not defined as “to produce again while the original exists.” Thus, the right “to reproduce the copyrighted work in . . . phonorecords” is implicated whenever a sound recording is fixed in a new material object, regardless of whether the sound recording remains fixed in the original material object.

Basically, under this interpretation, you can never "transfer" a digital file. You can only make a reproduction under copyright law. And, yes, computers transfer files by making copies of them, but it seems a bit ridiculous that the whole concept of a transfer can be wiped out because of that. In fact, by this interpretation, even streaming (which still involves all the data being temporarily copied to your local computer) would count as reproduction. ReDigi pointed this out, noting the possibility of merely cleaning up your own hard drive being considered infringing, but the court buys Capitol Records's (EMI) argument that such uses are protected under other theories.

Moving on to the question of distribution, ReDigi doesn't deny that it's distributing files, but says that it's protected by fair use and (more importantly), first sale. Again, however, the court doesn't buy it. Part of the issue may be that ReDigi "abandoned" an argument it made earlier that merely transferring a file to a cloud locker for personal use is fair use, so it's left arguing that other aspects of its service are covered by fair use, but that's much more difficult under the basic four factors test. On this part, it's not that surprising that ReDigi failed to convince the court, as I'm not sure I see the fair use argument either.

The first sale part is where it gets more troubling. Effectively, the court wipes out first sale for digital goods, arguing that because (as above) each transfer is not really a "transfer" but a "copy," first sale doesn't apply. That is, first sale only applies to the initial "copy" "made under this title." But, the court argues, because the sale involves making a new copy, it's not covered by first sale.

In addition, the first sale doctrine does not protect ReDigi’s distribution of Capitol’s copyrighted works. This is because, as an unlawful reproduction, a digital music file sold on ReDigi is not “lawfully made under this title.” ... Moreover, the statute protects
only distribution by “the owner of a particular copy or phonorecord . . . of that copy or phonorecord.” Here, a ReDigi user owns the phonorecord that was created when she purchased and downloaded a song from iTunes to her hard disk. But to sell that song on ReDigi, she must produce a new phonorecord on the ReDigi server. Because it is therefore impossible for the user to sell her “particular” phonorecord on ReDigi, the first sale statute cannot provide a defense. Put another way, the first sale defense is limited to material items, like records, that the copyright owner put into the stream of commerce. Here, ReDigi is not distributing such material items; rather, it is distributing reproductions of the copyrighted code embedded in new material objects, namely, the ReDigi server in Arizona and its users’ hard drives. The first sale defense does not cover this any more than it covered the sale of cassette recordings of vinyl records in a bygone era.

That seems silly. Selling a legally purchased MP3 is absolutely nothing like selling a cassette recording of a vinyl record. When ReDigi points out that, under this interpretation, digital files have no first sale rights, the court hits back that this is not true. After all, it argues, you can still sell your hard drive with the original file on it. No, seriously. That's the court's response.

Section 109(a) still protects a lawful owner’s sale of her “particular” phonorecord, be it a computer hard disk, iPod, or other memory device onto which the file was originally downloaded. While this limitation clearly presents obstacles to resale that are different from, and perhaps even more onerous than, those involved in the resale of CDs and cassettes, the limitation is hardly absurd – the first sale doctrine was enacted in a world where the ease and speed of data transfer could not have been imagined.

The court argues that if such an interpretation is ridiculous (though it argues it is not) then it's up to Congress to fix it.

With that out of the way, the court says that ReDigi is guilty of direct infringement, contributory infringement ("the court finally concludes that ReDigi's service is not capable of substantial noninfringing uses"), and vicarious infringement. Basically, a triple play and ReDigi is completely out of the inning. While I'm still not convinced about the fair use argument, the court basically killing off first sale for digital goods is a pretty big problem, and hopefully higher courts (or, dare we dream, Congress?) will fix such an obviously nutty ruling.

In the US, Redigi is operating in the shadow of a lawsuit filed by the RIAA (with EMI/Capitol Records taking the lead). The RIAA wanted the company shut down, but the presiding judge refused to grant the injunction, citing concerns about the right of first sale, as well as a lack of "irreparable harm," as claimed by EMI. However, he did note that EMI's arguments were "compelling," which likely means that sooner or later, the RIAA will get its way. (The outcome of Kirtsaeng vs. Wiley will also have some impact this lawsuit, should it reach its conclusion first.)

Over in Europe, Redigi is relying on a ruling against Oracle (who was taking on UsedSoft, a software reseller), which claimed its software couldn't be resold. "Copyright exhaustion" is the key here -- a concept related to the right of first sale -- meaning the copyright holder's control ends once the sale is made. More importantly, the European court declared that the software could be sold even if Oracle's contract with the end user prohibits resale.

Obviously, this doesn't sit well with many rights holders. As we're all too aware, when we buy a digital good, we're usually exchanging our money for a license, rather than something we can resell or transfer or even move from computer to computer. These licenses allow the control to remain with the copyright holder (or the retailer/distributor) for long after the famous "first sale." As Redigi's CEO points out, if you block the customers' right of first sale, then they have vastly overpaid for these licenses.

[M]ost lawful users of music and books have hundreds of dollars of lawfully obtained things on their computers and right now the value of that is zero dollars.

Whether or not Redigi will be successful in Europe remains to be seen, but its business model is applying pressure to rights holders and their representatives to define more clearly what they feel customers are entitled to when they purchase a license disguised as a digital download.

Oh, and Redigi's CEO mentions books for a reason. The company is hoping to expand its current offerings from mp3s to ebooks... and video games. Rolling up on Amazon and re-triggering the AAA game developers' distaste for the secondhand market means things could get interesting in a hurry.

from the first-sale-is-dead dept

I've said before that I'm skeptical of the idea behind ReDigi -- a seller of "used" mp3s. The company claims it has a system to make sure that if you sell a music file you own, that they then make sure it's deleted from your computer. This just seems dumb for a variety of reasons -- some economic, some technological and some legal. But, most of all, I just don't see people caring enough to make this a valid business. Either way, whether it's dumb or not, the RIAA couldn't let the company actually try something new... so, of course it sued, with EMI subsidiary Capitol Records taking the lead on the case.

Somewhat surprisingly, the judge refused to issue the injunction, calling the case "fascinating" and noting that there were some serious issues to be dealt with concerning first sale rights around copyright (whether or not you can sell a product you bought that is covered by copyright). However, the judge also made it clear that he thinks that the record labels are likely to win in the end, saying that their arguments "look to be compelling." He just didn't issue the injunction because there was no evidence of irreparable harm if the site stayed up, as detailed in the transcript embedded below.

from the dumb-in-almost-every-direction dept

Earlier this year, we wrote yet another attempt (and there have been a few) to set up a system for "selling used mp3s." It seems like a pretty pointless idea for a few reasons. First, why bother? Second, all the convoluted and annoying systems the company puts in place to try to make this "legal" just makes it annoying and useless. But, third, as we noted at the time, there was no way that the RIAA would let this happen.

And, indeed, the RIAA is now demanding that ReDigi stop allowing for the sale of used mp3s. I'm having trouble thinking which is the dumber idea: trying to set up a convoluted and useless marketplace for selling "used" MP3s (something almost no one will want to do), or the RIAA even bothering to call extra attention to ReDigi by threatening and potentially suing.

A tip to the RIAA: this was dumb. Almost no one cares about or was using ReDigi anyway. It would have just faded away. By threatening, you bring them back into the limelight. On top of that, you (yet again) make yourselves look like clueless luddites who wish to wipe out the First Sale doctrine. Even worse, you could end up in a lawsuit that reminds you that the First Sale doctrine does exist, and is recognized by the courts, and you could establish a precedent that "reselling" used digital content is legal. So why bother, other than this bizarre and shortsighted infatuation with the idea that if anyone, anywhere benefits without you getting a slice, it must be illegal?

That said, just the fact that the RIAA insists used MP3 sales are illegal proves how the RIAA is being knowingly dishonest in comparing MP3 downloads to "stealing a CD." After all, it's perfectly legal to sell a used CD. However, if the RIAA is claiming that it's not legal to sell a used MP3, then it's admitting that digital files and physical products are different. Thus, it seems like a pretty weak argument to pretend that the rules of the physical world only apply when it helps the RIAA and the major record labels, but absolutely do not apply when it leads to consumer surplus.